U.S. Zinc mulling oxide expansion in China

DANA POINT, Calif.  U.S. Zinc Corp. is expanding its zinc oxide plant in Millington, Tenn., and likely will further develop its facility in China as the producer works to improve supply security for clients, a company executive told AMM.

Tracy Baugh, U.S. Zinc executive vice president of commercial, said that while the expansions would allow the company to gain market share in a shrinking producer pool, the key focus is on making sure it can meet growing customer needs.

"We felt that there would not be enough security for our customers of contracted business if we just added one furnace at Clarksville (Tenn.) and that adding another furnace at Millington would give us the best insurance policy," Baugh said on the sidelines of the International Zinc Association conference in Dana Point, Calif.

He noted that the recently completed expansion at its Clarksville zinc oxide plant was "running very well" and the Millington expansion should be up and running in the fourth quarter.

"Were looking at expanding in Chinawe dont know exactly how big (that expansion) would be, but were certainly looking at making additional investments in China vs. those that we currently have. Its something that well be making a decision on between now and the end of the year," he said, with investment in the country "highly likely" in the next 12 to 18 months.

The company also has a zinc oxide plant in Brazil, although currently there are no plans to boost its capacity further. "We have a little bit of capacity still available in Brazilnot much, but certainly someand the facility there is running well. But right now we have much better options elsewhere," Baugh said.

Houston-based U.S. Zinc is the worlds largest producer of zinc oxide, using high-grade and special-high-grade zinc metal as well as zinc secondaries.

But the increased use of secondary zinc, particularly top dross from continuous galvanizing, has led to shortages. "Ultimately we have to supplement with special-high-grade zinc. Certainly we pride ourselves on being a big recycler but were getting to a point where we have to use (special-high-grade) zinc to maintain the growth that we are going to have," Baugh said. "Theres no set ratio between the use of secondary and (special-high-grade) at our operations, but for instance at Millington were looking at an expansion based on (special-high-grade). Were getting pretty close to a point where new capacity is going to be mostly (special-high-grade)."

From a raw materials standpoint, this puts upside pressure on costs, whether safety, environmental or overhead costs, he said.

Baugh noted that the Chinese government is cracking down on high-polluting industries and this could lead to the closure of not just zinc oxide plants but other manufacturing industries that are intensive users of coal-fired energy. In China, U.S. Zinc uses natural gas.

"Is it becoming more costly? Yes. Is it going to be significant for us? No, because we stay ahead of the curve," he said. "(Special-high-grade) recoveries are more expensive but more efficient, so theres a tipping point somewhere."

U.S. Zinc also produces zinc dust from high-grade and special-high-grade metal as well as from zinc secondaries.